Three insurance companies in trouble

MASERU – THREE insurance companies are in trouble after they allegedly defied the Central Bank of Lesotho (CBL) by engaging in business even after the central bank had revoked their licences. The CBL, which revoked the licences of Medi Life Assurance Ltd, Law Protection Clinic Ltd and the Legal Voice Ltd in December last year, is now mulling legal action against the companies. The central bank said the companies have continued to take premiums from policy holders. It also complains that the companies have not alerted the policy holders of the CBL’s decision to revoke their licences.

However, Medi Life posted the central bank’s warning on its Facebook wall on April 18. There is nothing on Legal Voice’s Facebook wall warning clients about the revocation of its licence. Also the Law Protection Clinic does not have the Central Bank’s warning on its Facebook wall. Efforts to contact Medi Life and Law Protection Clinic were not successful at the time of going to print. However, Legal Voice said it would respond through a press conference later.

The Central Bank says the decision to revoke the licences was based on the companies’ failure to comply with the Insurance Act of 2016 and the Regulations of 2016. The bank says these companies were instructed to stop accepting premiums from policy holders and to go back and make their clients aware of the state of affairs as well as pay-out claims that were in hand. However, the CBL says it discovered that two of these companies had continued to accept premiums even after they were instructed not to do so.

Puseleso Sekamane, an Insurance Analyst at CBL told thepost that for the past five years the CBL has been monitoring these companies as required by the Act. The Act requires that insurance companies submit their returns every quarter so that the CBL can monitor and assess their performance in terms of profits and assets. “There were things that they did not meet. Their margin of solvency, which is a measure of their capability to pay-out what they have promised to their clients and their governance, did not meet the set requirements,” Sekamane said.

Sekamane said the companies were registered when the Insurance Act of 1976, which said insurance companies should have a capital of M65 000, was still operational. She said when the figures were revised upon realising that the amount was no longer sufficient all insurance companies were told that they now have to have M4 million as per the new Act and regulations. “Companies were engaged when the Act and the Regulation were tabled,” Sekamane said.

She said the three companies initially failed to meet the new requirements but assured the CBL that they would try to meet the requirements. “We understood some of their reasons and wanted to ensure that we do all we could to assist them to meet requirements,” she said. “We monitored, advised and recommended countless times before we decided to revoke their licences.” She said among their reasons was that they were small businesses and needed some time to raise the requested capital but at the end they failed. Relebohile Letele, another CBL analyst, added that in terms of governance companies are expected to have more non-executive directors than executive members as they are considered to be objective and are not all about pursuing their own interests.

“However, in one of these companies the owner was the sole decision maker,” Letele said. “He did not take the board’s decisions into account,” she said. Sekamane said Legal Voice found an investor who claimed to have the required money but the CBL refused to let him bail it out. “The investor also failed to meet the set requirements therefore we could not allow one business that was in trouble to rescue another troubled one out of trouble,” she said. Letele said the insurance companies will have to re-register if they want to operate again but whether they will be licenced again or not is at the discretion of the licensing commission.

She said the commission will take into consideration, among other things, their cooperation before and after their licences were revoked. The CBL said it is their mandate to protect the public’s finances hence they issued a press release to warn the public after they realized that the two companies were still accepting premiums.